THE WEEK IN HEALTHCARE;TAX EXEMPTIONS;PA. NOT-FOR-PROFIT SYSTEM TO SUBSIDIZE LOCAL SERVICES

Main Line Health System, Radnor, Pa., has agreed to make voluntary contributions of more than $200,000 a year for three years to help subsidize local municipal services, ranging from fire and police protection to snowplowing.

Main Line is the 10th not-for-profit institution and the only healthcare provider to make a deal with Lower Merion Township, an affluent political subdivision outside Philadelphia with a $50 million budget for 1996. Another 20 not-for-profits, none of them healthcare providers, have been asked to make payments but have not done so.

Local governments in Pennsylvania have been among the most aggressive in the nation in seeking payments in lieu of taxes from not-for-profit organizations.

Faced with a stagnant revenue base and the upcoming expiration of a favorably priced solid-waste disposal contract, township officials needed a way to create additional income without having to raise other taxes and fees. In April 1995, Lower Merion unveiled its "Voluntary Contributions for Township Service Needs Program," targeting 30 not-for-profits including schools and universities.

Under the agreement, Main Line will pay $206,000 for fiscal 1995 and $210,000 in each of the following two years. That's about 25% of what the healthcare system would pay if it were taxable. The system has negotiated discounts for prompt payment.

Three of Main Line's five system members-Bryn Mawr (Pa.) Hospital, Lankenau Hospital in Wynnewood and Community Health Affiliates, a home health agency-are located in Lower Merion.

"Part of the mission of the Main Line Health System and its member institutions is to be good corporate neighbors," said Ken Hanover, president of Bryn Mawr and Lankenau.

Because Main Line relies on the township for certain services, works with township officials on building issues and provides vaccines to township employees, "we just decided that it would be better if we worked with them rather than to get into a really nasty battle with them," said Richard Wells, a Main Line spokesman. "Would we prefer not to pay this money? Sure."

Last year, excluding Main Line's contribution, the township received $10,000 in voluntary contributions.

But the program hasn't been universally embraced. Last September, Lower Merion challenged the tax-exempt status of the schools and universities that had not agreed to participate, Cleland said. He said the township withdrew the challenge when the city of Washington, Pa., lost a similar suit seeking payments in lieu of taxes from Washington and Jefferson College, a local liberal arts college.